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Franchising
is a powerful business model capable of efficiently delivering to
the masses such varied resources as oil changes, emergency
medical care, accounting services and jelly doughnuts. But could
it do even more? Philanthropists
are considering whether the franchise model can be used to bring
vaccines, contraception, clean cooking fuel, food and other basic
necessities to people in the developing world. The idea, known as
social franchising or microfranchising, is beginning to
catch on. After a few years of experimenting, the aid community
is refining its approach and is ready to make social franchising
a major plank in the way nongovernmental organizations (NGOs)
assist the world's poorest regions.

The model is similar to commercial franchising, but the
bottom-line goal is not pure profit--although many social
franchises do aim to become self-sustaining. Rather, these
organizations measure success through the number of people they
feed, vaccinate or otherwise serve, and the number of franchisees
provided with jobs.

In general, a social franchise, often sponsored by or spun off
from an NGO or aid organization (although there are many
independent social franchises), creates a network of local
entrepreneurs who sell products or services door to door or from
their homes. For instance, World Health Partners, a nonprofit
launched in 2008 in India, recruits people in remote rural
villages with limited access to healthcare. Through cell phones
and portable computers, these reps connect their neighbors to a
doctor in a larger city for a telemedicine session.

Other franchises offer internet connections or the use of cell
phones, fortified dairy products, family-planning materials and
even beekeeping supplies. Most social franchises rely on
charitable donations or grants to stay in operation, but as the
businesses become more sophisticated, many are hoping to reach
self-sustainable levels.

Chuck Slaughter, founder of clothing and gear company TravelSmith
and an entrepreneur who has helped turn around several
international apparel brands, started his social franchise,
Living Goods, in 2007, delivering lifesaving products to the poor
by harnessing the power of the market. Using what he calls the
"Avon lady" model, his crew of franchisees go door to door in
villages in Uganda and Kenya, selling basic medicines, healthful
foods, high-efficiency stoves, solar lights and other health and
safety products.

Living Goods provides working capital
loans to its agents, who earn sales margins of 15 to 25
percent. The company's goal, besides improving the livelihoods
of its agents, is to treat deadly diseases in children, as
well as to improve the health and income of its customers.
With local on-the-ground knowledge and a desire to increase
their profits, Living Goods representatives often venture into
areas that are passed over by aid organizations.

Living Goods isn't self-sustaining yet, but Slaughter says the
franchise is moving toward that goal. Much of that will come from
the introduction of private-label products, designed by the
company, which will reduce margins. Living Goods is also
harnessing technology, using mobile phones and smartphone apps to
gather market data that will help sellers market products
directly to individual villagers.

"I've been doing this for seven years, and we're structured as a
nonprofit," Slaughter says, "but the longer I'm involved, the
fewer distinctions I see between ordinary franchising and what we
do."

VisionSpring, which sells eyeglasses to
people in more than 20 countries, followed a model much like
Living Goods when it was founded in 2002. But simply selling
glasses wasn't profitable enough to support sales reps, so the
company changed the way it operates: Now the majority of its
15,000 "Vision" entrepreneurs are health workers allied with
other organizations. VisionSpring teaches them how to dispense
reading glasses, so that selling glasses can become an extra
source of income. For the 703 million people who need
glasses--the vast majority of them in the developing world--a
pair of simple reading specs can improve their quality of life
or help them find employment, especially for high-detail work
such as weaving.

But VisionSpring also has a second model, one that has seen
success in India and El Salvador. Instead of just selling reading
glasses, entrepreneurs are associated with an optical store in a
larger town. They travel to communities, selling glasses and
eyedrops and treating common eye problems but are able to refer
more complicated cases to the optical store. "We call it the
hub-and-spoke strategy," says Jordan Kassalow, founder and
co-chairman of VisionSpring. "It's like LensCrafters meets Mary
Kay."

But after years in the nonprofit world helping millions of
people, Kassalow is convinced that VisionSpring needs to be a
viable business to reach a significant number of the millions
more who need vision care.

"If we were a charity, we'd be really proud of ourselves," he
says. "We recover $7 from the marketplace for every $10 we spend.
But if we aren't sustainable, we'll be scaling those losses as we
grow. We don't want to make ourselves more dependent on charity.
We recognize there just aren't enough philanthropic dollars.
Unless we develop a viable business model, we'll never be able to
scale enough to make a dent in the overall problem."

As Kassalow and his team refine the way they do business, they're
getting close to sustainability. They estimate they will break
even in El Salvador this year. In India, they will cover 80
percent of their costs. But the main reason Kassalow wants his
business to be self-sustaining is to demonstrate to multinational
companies that there are ways to find and sell to the world's
poor, and that the endeavor can be both philanthropic and
profitable.

"We're so small compared to these $8 billion or $10 billion
companies. If we help just half a million of the 700 million
people who need glasses, we'll be wildly successful," Kassalow
says. "But if one of these companies sees our success, they can
help 100 million people easily. If they came in, we'd feel pretty
proud to be the catalyst."

Greg Starbird is CEO of the HealthStore Foundation, which
franchises 65 CFWshops (the name stands for Child and Family
Wellness) in Kenya and 56 One Family Health locations in Rwanda.
He's like to see his business become sustainable but knows he has
to be realistic. "Nowhere in the world is healthcare delivered
without subsidies of some sort," he explains. "We are trying to
figure out ways to reroute those subsidies into the system so
they become revenue for our franchisees."

The franchisees for CFWshops, typically trained nurses, spend
roughly $7,500--a vast amount of money in the region--to open
their small-scale drug stores and health clinics, which chiefly
serve subsistence farmers in rural areas.

"Our fundamental concept is to provide access to drugs and
healthcare through stripped-down drug shops and clinics,"
Starbird explains. "Currently, every link in the healthcare chain
in the area is severely compromised. There is inadequate
information. Assessment is poor. Drugs are substandard. There's
an irrational use of antibiotics. Treatments don't reach
patients. All of this leaves people sick and dying for no reason.

"But it's not because people are so poor," he continues. "It's a
systemic issue. In that context, our concept is a
standard-format, high-quality, low-cost system that can operate
in small clinics. We observed that among business models,
franchising seems to maintain brand standards and scale well and
does that efficiently."

Starbird has consulted with members of the business franchise
community to help streamline and organize CFWshops, and he
believes there's much more that for-profit franchises could do.
"We're one of the only groups, if not the only, that have worked
explicitly with people who have built large franchise systems. We
get real operational advice from them," he says. "I think there
are huge opportunities for businesses with social benefits that
go beyond the boundaries of NGOs and development work."

In fact, this year the International Franchise Association (IFA)
will reveal the results of its Social Sector Franchising Task
Force. Consultant Michael Seid, a franchise veteran and
chairman of the task force, believes there are many ways the
for-profit franchise community can help social entrepreneurs.

"Scott Hillstrom, chairman of the board of the HealthStore
Foundation, pigeonholed me at an IFA convention a decade ago,"
Seid recalls. "I had no interest in social franchising. But after
five hours of talking with him, I'd agreed to go to Kenya. He
asked me, 'Have you ever saved a life through your work?' And I
never had. Franchising brings the ability to sustainably and
consistently provide quality products and services to populations
that have never seen that before.

"Did you know 50 percent of drugs in sub-Saharan Africa are made
of chalk?" Seid adds. "Think of that. Social franchising can help
control the quality of medicine just like Subway or McDonald's
controls its food. It's really no different than any other
franchise system."

Seid and the IFA task force are creating a mentorship program
that will enable franchising leaders to advise social
enterprises. They are also creating model operations manuals and
guides for NGOs on how to operate franchises efficiently.

But social franchising is just one strategy in a new world of
market-driven solutions to poverty, one that includes
micro-credit, social venture capital and more traditional
vehicles such as grants. The Skoll Foundation, which supports
social-entrepreneur-led organizations, has been so impressed by
the impact of World Health Partners that it has invested in
leveraging the nonprofit's microfranchising model to provide
energy to rural areas.

"Microfranchising is a tool that may or may not be appropriate,
depending on the impact you're after. It fits into an overall
ecosystem. But it's exciting," says Sally Osberg, Skoll
Foundation president and CEO. "It just shows you that once you
unleash the entrepreneurial ambitions in people, there are all
types of opportunities to build on."